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For months rumours of share-ramping, market manipulation, excessive loans to their owners and unusual transfers off-shore have been circling Kaupthing Glitnir and Landsbanki, whose failure last October left 300,000 British customers unable to access their money.

It has now become clear that this was no ordinary crash. Iceland's special investigation into "suspicions of criminal activity" at the three banks is likely to stretch from Reykjavik to London, Luxembourg and the British Virgin Islands.

Eva Joly, the French-Norwegian MEP and fraud expert hired by Iceland and now working with the Serious Fraud Office, now believes it will be "the largest investigation in history of an economic and banking bank collapse".

Many of the banks' secrets are likely to be inextricably bound up with corporate Britain and the success of these investigations in tracing and recovering assets is likely to affect every UK household.

Local authorities lost Â£1bn â€“ or 5pc of all the money from council tax â€“ in the over-leveraged institutions, leaving many facing the prospect of drastic cuts in services or steep hikes next year as they wait for the proceeds of the banks' administration to dribble through.

Although the Treasury can barely afford the UK's own bailout, it was forced to pay out Â£7.5bn to British savers who had internet accounts with Landsbanki's Icesave and Kaupthing's Edge with the uncertain prospect of getting the money back.

Not only did local authorities, charities and savers have billions tied up in its bank accounts, but a number of the City's wealthiest investors, from Robert Tchenguiz and the Candy Brothers to Kevin Stanford and Simon Halabi received hefty corporate loans from these insititutions, .

But among the worst affected by the crisis are 10,000 savers with Â£840m tied up in Kaupthing in the Isle of Man and 2,000 savers with Â£117m in Landsbanki in Guernsey. All lost their entire savings with no compensation and are still waiting in line with a queue of commercial creditors.

When the banks were put into administration last October, experts believed that Iceland's banks had simply fallen prey to the global credit crisis.

But Dr Jon Danielsson, an Icelander who teaches economics at the London School of Economics, believes that while the timing of the crash was dictated by the global banking crisis, the scandal is unique among European financial institutions.

He believes the root of Iceland's problems that have now decimated its economy appear to have started when the government decided to privatise the banks in the early 1990s.

"Iceland got its regulations from the EU, which was basically sound," he says. "But the government had no understanding of the dangers of banks or how to supervise them. They got into the hands of people who took risks to the highest possible degree."

Kaupthing fell into the clutches of the Gudmundsson brothers, ÃgÃºst and Lydur, who made their fortunes building up the Bakkavor food manufacturing empire, which supplies hundreds of supermarkets in the UK. Their investment vehicle, Exista, owned 23pc of the bank, counting Robert Tchenguiz, the London property entrepreneur as a board member.

More at the link.

Yes Iceland banks where unique as they where the only one's that took huge risks.